math(urgent)

$1000 was invested for two years at 10% simple interest .calculate the effective rate was earned.

pls check my solve

(1+0.1/2)^2-1
= 0.1025

but the true answer is 9.54%

pls help me to get the formula of effective rate

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asked by fizz
  1. Interest earned was simple interest, so in two years, the future value is
    1000(1+2*0.1)=1200

    With compound interest of rate i, the equivalent interest would be
    1000(1+i)²=1200
    or
    (1+i)=√(1200/1000)=1.095445
    or 9.54% approx.

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